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The real killer of newspapers, magazines won’t be the Internet

Ever since the rise of the commercial internet, the physical distribution of media has been under fire. The demise of magazines and the death of newspapers in particular has become a spectator sport and the debate is typically framed as ‘Internet vs. Newspapers’ or ‘Internet vs. Magazines’. While it is conceivable that over the next 10-20 years the internet will continue to chip away market share and eventually render those industries obsolete, perhaps there is another elephant in the room facing newspapers and magazines that poses a far greater extinction risk than the internet ever will.

A couple of weeks ago I watched the documentary film called “Collapse” (available via Rogers On Demand). It’s a riveting, thought-provoking character-study of a man named Michael Ruppert who believes the world is currently crossing through a critical threshold known as ‘peak oil‘.

“Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline.”

I’m not going to get into the meat of the peak oil issue here, it’s just far too big for this post. However, since watching Collapse I have sunk my teeth deeper into the tentacles of the peak oil movement, read lots of articles and consumed a lot of video on the subject, and am now reading a book by Jeff Rubin, a former global energy expert for CIBC World Markets called “Why Your World Is About to Get a Whole Lot Smaller“.

One of the largest media sales in Canadian history is currently taking place as Canwest’s extensive network of daily newspapers looks for a buyer(s). Many analysts expect those assets to fetch north of a billion dollars on the open market. While Canwest’s newspaper titles are paired with digital editions, much of that price tag will be based on the present-day cash-flow of their daily newsprint operations.

From the production of the paper, to the printing process, to the distribution chain, both magazines and especially daily newspapers are extremely carbon-intensive operations which rely greatly on the availability of cheap oil energy. In June 2008 the price of oil skyrocketed to an all-time high of $147 per barrel. However, a few short weeks later the world economy plunged into economic collapse and the price of oil plummeted back down to $30 as global oil demand sunk with the economy. Because we didn’t experience any prolonged exposure to $140/b oil, we really didn’t get an accurate indicator of what the effects of high-cost oil would be to the most carbon-intensive businesses. Now that we are in some form of economic recovery, once again the price of oil is on an upward climb, currently hovering at approx. $80/b.

This inevitably leads to the question of what happens to these oil-intensive businesses when the days of cheap liquid energy are over? Is the daily newspaper in any market a viable business at a sustained oil price of $140/b? What about $200/b? What about $250/b? Depending on who you ask, those days are approaching much faster than you think.

Now the “peak oil” theory is gaining support at the heart of the global energy establishment. “The IEA in 2005 was predicting oil supplies could rise as high as 120m barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year,” said the IEA source, who was unwilling to be identified for fear of reprisals inside the industry. “The 120m figure always was nonsense but even today’s number is much higher than can be justified and the IEA knows this. “Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further…. Colin Campbell, a former executive with Total of France told a conference: “If the real [oil reserve] figures were to come out there would be panic on the stock markets … in the end that would suit no one.” – via Guardian.co.uk

Despite the alarming quotes, I’m not running for the hills, and furthermore I’m actually quite bullish on the near-term economic outlook. But as I learn more about our energy issues, I am more convinced than ever that the rising cost of liquid energy poses a far greater mid-term risk to legacy media businesses than the migration of their audience to another medium.

@Mark – I think what makes Jeff’s book so sobering isn’t just the conclusions he comes to about where we’re headed, but it’s also rooted in how credible he is on the subject. When a world-recognized expert on energy quits his comfy, cozy corporate job specifically to write this book, that really gives extra gravitas to his words. Both the movie Collapse and Jeff’s book have really made me become far more aware not just of the energy I use, but of the hidden energy output/costs in all of things we love about our industrialized society. It is pretty staggering how reliant our current way of life is, not just on oil, but on cheap oil.

I think the whole issue is will we have for very much longer newspapers or magazines printed on paper. It will be no longer an oil or environment issue, just economics. Are we approaching the era of no more free content from the Web (except of course spam, gambling, or sex). e-Readers are about to brake through common usage and media content will go by subscription (NY Times is setting up their e-subscription plan). Of course, not everyone reading a local newspaper will rush out to buy an e-reader but the main trend will start, as it is for television, not everyone rushed to change their analog TV set for a digital one. I truly believe that in the next 20 years (one generation), oil will be reserved to very specialized use to make for product that technology has not been able to chemically replace (plastics?, fibers, etc). One image, although not related to your post, is the tanker converted to a floating hospital sailing at the rescue of the injured Haitians. NIce image, hopefully being a sign of what is to come.–Luc, Montreal